>> ilike to wish a heart felt welcome to keith farrell, the newest member of our family, kwaulgss to his mother kate. we miss you so much. i'm jim cramer, see you tomorrow! villanova! good evening, everyone, i'm larry kudlow. this is ""the kudlow report." "sequesters outrages capitol hill. if the budget cut results in 40% of flights arriving late? huh, senators and house members are now shouting a little louder that this is a manufactured crisis that could easily be solved with better management. also this evening, earnings reports are dominating the financial news right now. they're coming in better than expected, but the pessimists are obsessed with revenues. they're wrong about get profits are the muck of this entire four-year stock rally. and another green energy taxpayer bailout in the making.

the super luxury car maker is heading into bankruptcy, fisker and even worse, president barack obama kept sending fisker money for a year. the "kudlow report" begins right now. ♪ first up tonight is flight delays and passenger pains amount from the faa spending cuts sequester. many on capitol hill are arguing that this is a phony, manufactured crisis that could easily be avoided by better management. republicans blaming the white house for selectively choosing which cuts will make us all feel the maximum pain. take a listen to this exchange on the hill today. >> you are imposing these furloughs, bringing pain to the american people for the purpose of shifting political blame.

>> that's not true. we have been talking about reduction and available controller hours of 10% for months. >> but you didn't tell them which airports, which airlines, which times. >> we told them they should expect significant impacts at major hub facilities. >> but is the white house deliberately telling these agencies to do as much popular damage as possible and as visibly as possible, including things like medicare and park closings and the popular fleet week in new york city, which has been cancelled? joining us now with the latest political lowdown, robert costa, washington editor of "the national review." all right, they're building them left and right, bob costa, but what's going to come of this? >> larry, good evening. i'm not so sure there is a conspiracy with the air traffic controllers, there is a battle. you have harry reid and the white house saying they want to get a replacement for the sequester cuts. they think these delays will get people rhode island up, and stop

the sequester. >> is there any evidence it would change their stripes, that is the white house the executive branch? they already have, i am not going to go into details, they are more liberal with these sub accounts than these agencies are pointing out, particularly the faa guy. but a lot of republicans say we will change this. will they change this? will the president allow them to have more latitude to avoid the alleged disaster scenario? >> one thing i just heard here on capitol hill, larry, is republicans behind the scenes are opened to a sequester replacement. they are getting pressure from back home about the delays about a lot of these federal cuts. but the question is, request they get replacement cuts if they replace the current cuts. >> and the second question related to that, at least i'm going to ask you, if you have sequester replacement, do you have tax revenues coming on the scene? >> what with the white house and the senate democrats are trying to do, larry. they want to make this not about the sequester but about taxes. they think if the republicans

get nervous about if sequester, ma ib the republicans will see and give new revenue over to the democrats. but there is a lot of pressure from the right from republicans to do. that so i doubt it will happen. >> so, therefore, you don't think there will be changes coming out of the house? >> i don't think so. the house is still a very conservative body. they knew, they're comfortable with the sequester. they're not going to replace it with revenue. that's for sure. >> all right. so it's a kabooky dance, everybody is playing their little role. >> that's right t. democrats are trying to score points with the flight delays. republicans are pushing back. this is just static right now in walk. i don't think it will have a big impact in washington in terms of politics. >> richard costa, we appreciate it. right to our distinguished gevths in a few minutes, we will have jack bern steen, with me on set, i am honored, former reagan economic adviser art laffer of laffer investments. i have steve forbes, forbes' media chairman and editor-in-chief. good evening, gentleman. thank you very much. >> thank you, larry. >> art, laffer, is this a

manufactured crisis by the white house to impose a $1.2 trillion tax hike? >> it could be solved bety white house very easily, very simply, they could to get it to go away and not happen. i don't know if they actually manufactured it, larry, they can get rid of it in no time. it's the dumbest thing i have seen. back in 1981, we had an air traffic controller's problem, that did not enure well. >> they brought in substitutes. i guess you can't do that at this point. they brought in substitutes. everybody did very well. steve forbes, i read in one of the papers today, lo and behold the washington airport, reagan and dulles, i presume, are fought being affected by these delays. are you finding that shock something. >> larry, this is a manufactured crisis, the faa is one of the worst-run agencies in government. they have 15/16,000 nonessential people they could have dealt with. they don't have to treat airports other than washington

across the board treatment. they could resolve this. and there is a $474 million appropriation in that budget for community development, green community development. what that is doing with the faa, i don't know. that's the kind of jump they could easily remove. >> i had $447 million, you are right, for community green development. also, $500 million for various consultants that were supposed to fix that at the faa years ago. it never got fixed. the whole cut is $630 million. right there, those two items would have covered the cut intl by the way, this is an opportunity to reform the faat. rest of the world is way ahead of us. we could have handled twice the traffic. by the way, larry, the number of flights is 20% less than three or four years ago. so what's happening here? >> one other thing or two, if you buy an airline ticket, you got a tax on there specifically to provide for air traffic controllers. so why the heck could that money go and business dissipated elsewhere? >> that is a great question.

are you a former assistant director of the office and manage and budget? >> chief economist, yes. same job you had. >> i had the same job you had about ten years later under different administrations. but in terms of this, right, there is a user fee tax. why can't they just use that, declare the controllers to be essential personnel and fund them directly by this designated user tax, which is exactly what they should do. i do know why they're not doing it. i don't know if i agree with steve that it's actually manufactured, but they can solve it in no time. >> you don't think, let's go back to this. >> i can't imagine them in the back, saying let's do the maximum harm? >> maximum harm. why not? blood and guts politics. >> their whole being is in a bureaucracy, you exist to expand. so in a crisis like this oh my goodness, you touched my budget, we need more money. look at all the problems we have. so it's a part of their instinct. and the white house could have blocked this in two seconds if

they wanted the extra money. >> this just puts their budget back to 2010. since 2008 the faa has had a massive and i mean massive increase, multi-billion dollar increase in their budget. we're not playing small potatoes here. 15,000 controllers, by the way, roughly half the agency. again, they could all be financed by this user tax fee. as a former bureaucrat, there's two words i want to put on the table "reprogram" and "subaccounts." in other words, the executive agencies can take if being accounts and divide them into subaccounts. they can do get inside those sub accounts, they can reprogram how monies are spentt. >> of course. >> that's all they have to do. subaccounts can be reprogrammed. >> that's what i was saying, they could solve it in two seconds, change the subaccounts. this is the one area they should not sacrifice the air track controllers, because this is critical of the nation's

business. if you look at the economy, i can't imagine anything worse than could be done to damage the u.s. economy than to pulling back air traffic controllers and, god forbid, larry, if we should have an accident because of this and there should be some sort of retribution. i just don't know why they do this type of stupid thing. >> what makes me suspicious of the politics, is this battle spending cuts versus tax increases? harry reid, senate majority leader said no change, we're not going to change. president barack obama happens not accepted any republican liberalizing the effect. he hasn't accepted any of that yet. you know what, they're starting to hit medicare, they're starting to hit education and housing in the worst spots. that's why i'm suspicious. what's your take? >> absolutely. he figures if he makes it so painful, the president makes it so painful, never again would anyone dare to touch a dollar going into the government and spending plans.

it's the old washington monument plan, hit the thing they are complaining about so they never try it again. >> i with wish the republicans had a little backbone and push back on that, like every country has done, put it in a separate corporation, where those taxes go to the problem at hand. >> the public giving up on spending cuts, bloody hello break loose. >> why can't they have a counter plan? they knew this six months ago. they sit back and wait. >> hang with me. we have lot to do. get this luxury electric car maker fisker, heavily subsidized by the energy department, now going bankrupt. the administration kept paying them for a year after they knew it was going under. we are talking tax failure. that's up next. don't forget, quit picking winners and losers. the department of energy is not a venture capital fund.

i'm larry kudlow at taxpayer expense. fisker fisker .

the a.p. reported this morning the white house knew a year before fisker automotive failed that the super expensive car-maker's failure was inevitable. yet, team obama kept sending fisker our money. meanwhile, fisker execs appeared before a house executive today. hampton pearson joins us with all the details. good evening, hampton. >> good evening, larry, this felt like flash points from the start at a sub house committee hearing of a nearly half a billion loan to fisker, republicans accusing the obama administration of making a green energy bad bet. democrats defending a program they say has made more than $8 billion in auto industry loans with a 98% success rate. >> this is not a well thought out startup. it had a fancy design an big names behind it but no real business acumen.

>> but the world outside the beltway, anyone who exceeds expectations 98% of the time gets an 5-plus. that's what the doe's performance has been in this program. >> fisker automotive received $196 billion before it was frozen in 2011. documents show they knew a year earlier, they were missing key product benchmark, a top official and fivger's founder defended their actions. >> decisively to protect if taxpayers' interest, since it became ev dent that fisker faced financial difficulties. >> fisker was transparent with the department about its progress at all times. >> in recent day, the government has taken the unusual step of seizing $21 million from fisker's cash revs. that mean eowe cash reserves, that means taxpayers are on the hook for at least $170 million. larry. >> as you mentioned it's about a

$192 million loan t. totals a $5 between million. are people saying this thing will develop into a loss of the 500 million plus or are we going to sell it for something less here? >> i'm not clear on that, myself. i think it's -- again the first goal now is to at least recoup the money that fisker got, which was the $192 million. that itself starting point. then we go from there. >> hampton pearson, thank you. easy question, is fisker another case of cylindra with the government putting money on failed green energy projects? i'm here with steve forbes and art laffer. steve, this is cylinder squared. i want to read you some factoids that blow my mind, this is from the "wall street journal," this isn't fisker, regarding the electric hybrids, $465 million have given to teslor. listen to this, $5.9 billion in

government subsidies have been promised toed for and $1.4 billion have been promised to nissan. in other words, fisker and teslor are little drops in the oil. ed for got almost $6 billion in subsidies. what is the department of energy doing here? >> larry, it hasn't heard of a thing called fracking, it hasn't heard about free enterprise and entrepreneurs making seemingly possible things happen. they physical, electric is the way to go. it didn't work 100 years ago, there was an announcement last week oust of the university of illinois, someone's come up with there it looks like a teeny battery which they hadn't been able to do in 100 years. that didn't come out of the government. that came out of research in illinois. now in the real free market, somebody would take that and see if it could be made an electric car instead of employing billions that didn't work years

ago. >> larry. >> i'm surprised they haven't put wind mills on little cars. >> this has great power? >> by a factor apparently of 10. so we'll see if this thing pans out. that's what you do in terms of research. then entrepreneurs come along and see if it can be made of something. oboom ma fixed we are running out of energy. he believes that, his secretary of energy who has been a nobel prize winner. the nobel prize winner must be right. so they have been throwing billions of dollars at stuff. >> i have to clue on that a while. i've given you nobel prize. >> the secretary of energy the nobody emprize, never mind. >> i'll chew on. i want to ask, this is the an thit sis of free -- antithesis of free market. this is a hallmark of obama economics. once again it's fail something. >> they can pick losers and losers, isn't that what romney said? being with the two of you,

steve, i love it when you say get it's so correct. free markets do win. what is that phrase, free markets are the best -- >> beth path to prosperity. >> the best path to prosperity. it's true. they should get the heck out of the way, spending restraints, sound money, free trade, minimal reg lakes, get the heck out of the way, threat markets solve these problems. it's solved. >> out in the airways, we have discovered our great friend chad bernstein, former economist. jared, it's great to see you. >> hello. >> the problem is this fisker story is cylindra. once again, we have the government running against the market by choosing winners and loserings or losers against losers for a fortune taxpayers have to pay for. how can you defend this? >> well, first of all, i agree picking winners is problematic. but you have to remember a billion in private investors also invested in fisker. so for some people, this looked like a better investment than it turned out to be.

now a 98% success rate, as you heard earlier, is pretty god. i guess what you have to ask yourself, all 37 of you have to ask yourself is would the market sufficiently invest in advanced battery and electric car technology absent these loan guarantees? steve mentioned fracking a moment ago. we wouldn't have fracking if the government didn't explore research in that regard. picking winners, not invest income clean energy and advanced battery technology by the u.s. government is a bigger mistake. it has to be that first mover. private investors won't go there quickly enough. >> let me, if i can, if i request can, jared, excuse me, there were a lot of private investors in fisker, that's very true. but they risked their own money. you know, when the government goes and puts it in, they risk my money. and i had no way whatsoever into this silly thing nay are doing here. i have no problem with private people going in, because they take the risk. they get the losses or they get the gains.

that's their gain, their process. it's not meevenlt i think it's wrong what they do with physicaler and cylinra. >> you are making a solid argument. i want to give you credit. i want you to address my logic. i have to tell you, absent of the government taking the first step, we wouldn't have everything to the internet to the gps and laser and fracking, it just wouldn't be there, ba us if initial investment dollars aren't there. >> al gore invented the internet argument. do you have a comment on this? >> that's why the soviet union won the cold war, government is so good at doing these things. in terms of the first step, it doesn't. you look at the railroads of the 19th century, those that work or don't. those got the public subsidies had more accidents, less technological advances. that's what happens when politics gets involved. so if government wants to do

basically it, feen. let private investors take the real risk. >> fracking, by the way. >> we have to lean towards subsidy investments. there is no question there is some role. >> there was one man in there who made fracking possible. george mitchell from texas, all the engineers told him, including governor engineer, you couldn't do it. he's the one that pushed it and made it happen. >> i want to say, i know we have to get out. i know there is not one transformtive economic phenomenon in our or any advanced technology that doesn't have government's footprints on it at least at the beginning. >> the model came out of the department of energy, wow. electricity, same thing. >> that's it. no one denies government should have schools, should have roads, all that. >> student: that's there. that's a huge fingerprint. but this is not the proper role where government should be in. fisker, cylindra. >> you can talk about basic

reserves. >> al gore did not invent the internet. >> the point is there is a big difference here between generic bake research, which in some cases does. >> yes, that's correct. >> this is a good point. >> and investing directly in commercial ventures. that's the difference. commercial ventures, no. the biefk research, if from is agreement on that, fine. i got to get out. we got much more. hang on. folks, this is a new subject but a difficult one, the alleged boston bomber, no. 1 bomber in the boston marathon terror attack along with the rest of his family was on welfare. we have that outrageous story. we have much more coming up next on ""the kudlow report." " . 6 seema mody. . seema mody. .

accused boston bombers today. cnbc's seema mody has that story an more. >> good evening, larry. the parents of the two suspected marathon bombers are coming to the united states. both have been questioned by thoughts and the boys' father insists his sons are incident and framed. we learned the older brother testimonier lan had been receiving massachusetts welfare benefits. that ended last year because his wife was working. both of the parents received government benefits when the boys were much younger. and more rain and snow across the mid-west which is already dealing with flooding. the mississippi river as well as several others are well above

flood deaths. the cntc is investigating trading in 28 futures contracts for the five-minute period after that fake tweet hoax that briefly sank the market. everyone wants to know if the person that did this wanted to make money off it. now the cftc will feind out. now for something more upbeat, larry, i know you heard this song. ♪ sweet caroline. >> "sweet care loin" by neil diamond. it's become an anthem for the city, especially over the last week. that boosted downloads of the song by fearly 600%, 19,000 downloads just in the last week, larry. >> it is one of my favorite songs. i am a great neil diamond fan. god bless him. god bless boston. >> i agree. >> seema mody, thank you very much for helping out. now, outrage in america over

president barack obama's prep rehencible plan to tax, grab your 401-k and ira accounts. here is one example reading to the "wall street journal" today, quote, if i had to do it again, i would spend my money, enjoy everything that i let go by and let the government take care of me. we're going to debate this key retirement issue with art laffer, steve forbes, please stay with us. so being an advertising spokesman

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♪ welcome back to "the kudlow report." i'm larry kudlow. in this half hour, when roughly a third of s&p firms are reporting profits beating expectations up a handsome 7%. so far, sure, the pessimistas are wagging on light revenue reports. i say profits in milk and stocks are more important than revenues. we will debate that proposition. also, just as polk numbers are pulling even with president barack obama, get this, the george w. bush presidential library is about to open tomorrow. you will talk to one former bush staffer about the president's economic legacy and whether it's fair to blame the former president for the financial crisis. but first up, we've brought this up to you a few weeks ago, president obama's attack, new limit, karngs taxes, who knows

where this is going to end. guess what? the president, himself, doesn't have to abide by his own newly proposed rules, americans are outraged, now, letters coming into the "wall street journal" left and right. i read one before, paul stevens from washington wrote to the "journal," "these claims tend to target millionairre and billionaires be but their impact goes well beyond the top tax brackets, lower paid workers would lose not just the benefits of tax definitely, but also the convenience of payroll deduction. all right, let's talk about this, it's a very difficult story. we welcome back chad bernstein, art laffer and jared forbes. jared bernstein, limits are bad, not jared, you are mad president barack obama does not have to deal with these limits, he is not. >> that's just -- >> hold on, she not in a qualified account. his salary, he gets his cabinet-level status for the

rest of his life. he has no limitation, he has no taxes on that at all. and now he wants everybody else to suffer significantly with caps and limits on retirement. i don't think that's fair. >> okay. so, first of all, in the president's case, his contributions are fought tax advantage. so the cap is irrelevant in his case. much more importantly, though, you've got to ask yourself and i know art and steve are going to want to ask themself, too, at what point does a tax definitely retirement idea, which we all agree is a good one like an ira, become a tax shelter. remember during the campaign when it turned out mitt romney had numbers of 85 up to 100 million in these tax-deferred accounts, let me tell you that only .03%, .03% of iras now are above this cap. so this is a very high class problem we are talking about. >> wait a minute.

don't forget the 28% limit on deductions also damages tease tax-deferred accounts. you have to add them up. art laffer would you react to what jared said. >> i'll react. jared, i don't think savings accounts are where we want redistribution t. reason we have savings accounts is supposedly to get economic growth and jobs back to the system. in this tragically bleak design, tax environment, these tax savings for savings accounts, i think make a lot of sense. i would much rather see a full tax report of a low rate, flat tax. get rid of all this garbage and nonsense. >> ah! >> have one low rate which jerry brown proposed in 1982 and be done with all these other problems. >> we double tax investment and savings. why don't we just tax consumption. in other words, investment savings is the seed core of the whole country. that's why new jobs, new income. why would we want to tax savings, much less double and

triple tax? >> sadly, larry, in washington, much of the economics profession as well does not understand that investment is the mother's milk of pros period of time. without investment, you don't get a higher standard of link. trying to put caps on capitalization is ridiculous. we should be moving back through the flat tax or other reforms and in terms of what the president proposed on 401 ks, larry, you know and i know that's the beginning. first of all, they lied no us about social security, they are double taxed. we were told they would not be taxed when we were retired. they've moved back on that promise 20 years ago on roth iras. you put in after-tax money, i germany tee you when you start to get those benefits, they will do the same thing. this is a slow move cyprus is what we're experiencing here. >> can i spoo ec to those critiques, laerry? >> yes. of course. >> of course. >> here's the thing. the three of you always say -- and i happen to agree with

you -- that you want to broaden the base, broaden the tax base. then every time somebody comes up with a loophole, you explain why you don't like it. it sounds like none of you would cap these retirement accounts, so very wealthy people could keep it in there. that is a very inefficient tax break. >> can i just say something? gosh, darn it, jared bernstein, why do you want to tax those most likely to save and invest and prop up the economy? that's what's at the root of this. that's what the president does not understand. the very people who have the highest propensity to save and invest are getting stopped out by this -- it's my tax cap on this deduction. you are no longer taxing them, they have been around so long, they're a part of the whole fabric of this country. >> so it's okay with you if mitt romney has a 100 million to retire in a trust? >> it doesn't matter for a billionaire. >> this is a wasteful,

ineefficient tax cut. it's a wasteful inefficient subsidy. with edon't need it. >> i'd rather have mitt romney invetsing that 100 million than the people who gave us fisker and cylindra. >> jared, let me say. >> it's an ineefficient substance. >> when your friend voted for our bill as well is you can't piecemeal broaden the tax code. you have to do the whole package together. get rid of them all. lower rates at the same time. we made ours exactly revenue neutral. we dropped the highest rate and raised the lowest rate from 12.5 to 15. we dropped the number of brackets, we dropped the corporate. >> that would be much better. >> and 97 votes in the senate. >> i got to get out. >> flat tax. >> i want you to guys to stop criticizing every single loophole we fry to close. >> no. >> be still. >> jared, that's not true. >> give us a rate cut, we'll be with you. >> give us a rate cut. >> however, i apologize jared

bernstein i apologize for raising my voice. i get excited about that, because i want americans to grow rich. i want to make the rich richer, but i want the nonrich to get rich. that itself way this game works. >> i know where you are coming from. >> art laffer, steve forbes, thank you for all your contributions this evening. the top story on wall street right now, everybody is getting upset about weaker than expected top line revenues. okay. revenues are important. i say the warriors are going too far because ultimately stock value is created by profits. they are the mother's milk of the markets. we will debate it all next up on "kudlow."

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♪ [ male announcer ] look for the easy-open red arthritis cap. . earnings front and centre this weekend. seema mody is back with the big report. >>ed for, the auto maker, earnings of 41 cents a share, top estimates by 41 cents. that's thanks to strong sales in the north american division. although, european losses, excuse me, did worry the streets, analysts wrote this showed forbes' strategy, though, the strategy is actually working here in the united states and that is is furn-around -- turn-around strategy.

it could be seen as the company moving forward. procter & gamble reported a third quarter profit of 99 cents a share, which topped estimates. revenues fell short. that's the reason we seen the stocks end down on the day. similar story for whirlpool the largest appliance maker, sometimes seen as a play on the housing mark. its first quarter profit came up above estimate, thanks to higher prices in cost cuts. revenues came in shy of street expectations. management acknowledged it was hurt by its competitor's use of heavy discounting. that stock ended in negative territory as well. >> seema mody, we appreciate it. let's go straight to the scoreboard. we have 174 s&p companies reported so far. 68% beating estimates. only 40% beating revenue estimates. so far, however, item profits, as actual profits are up 7% against a year, actual revenues are up 2.8%. now, a little editorial. the great story of this bull

market over the last four years, to me, is profits, not economic growth, not sales revenues. since early 2009, s&p operating earnings increased 129% while the index, itself, has to gain 133%. so i want to talk to carole roth, former investment banker, best selling author of the entrepreneur equation. excuse me. carole, i'm not saying revenues don't matter. but i am saying in terms of the true value of the company, both now and in the future, it is precisely profits that matter more. >> i will completely disagree with you. it's profits that matter, some of that top line has to come down to the bottom line, larry. that's the only way it works. you have been in banking forever. let me use ipos, for example, how many successful ipos have you seen even if earnings having going up. almost none in history. the markets don't buy get it's not a sustainable growth strategy. you can't have a growth multiple

on an ongoing basis if revenue doesn't grow. >> i think ipos are an exceptional case and a minor case in terms of -- we're talking about the s&p 500 or the small caps. here's my point. the whole story of this bull market, which pessimists have missed. four years plus. companies nimble, companies tightening their belts. companies enhanced in productivity, companies having record margins. the margins are the best they have been since the 1950s. now i understand people are worried this can't continue. i get get but what i'm saying is, look at this story for four years plus, it has been an earnings story. it has been a great triumph of american business doing what they need to do to make profits noer their shareholders and this is the best stockmarket rally. it is not a bubble. it is bagsd on solid profits. >> well, we're back to just above where we were before. so basically, it went down. that's part of the reason why it's doing so well. i think the other story here are

qe and tina. there is no alternative. there is no alternative markets. i want to wow the market. we are the best alternative and the best alternative, you have to have some of that top line going down to bottom line. >> yes, the top line goes to the bottom lean. but again, i don't think you give companies enough credit for being nimble and belt tightening and productive. >> at the expense of main stream. they're not hiring people, they're firing people. you won't have customers to go to the bottom line. >> this is not a mackro story in terms of growth. the federal reserve has created a put for nominal gdp growth of about 4%. when you are in that slow environment, revenues will be slow. this is why i pull my hair at people and say the revenue is at 2%. in a slow environment, i don't see change in the growth pat fern, you will have slow revenues. look, it's happening again this

quarter. you are up 7% actual. that is a surprise. i know some misses and so forth, but whenever i see people, it's almost like sour grapes. give the company some credit for working some magic on the revenues they have. don't penalize them for the fact the world economy and the u.s. economy is not good go take away the qe. take away the fact there are no other good alternatives. >> i'll take away the qe. it's not a coincidence profits have gone up almost the same amount precisely as stocks. qe is there. extra low interest rates are there. qes in my humble opinion hasn't worked t. money supply hasn't created the growth. >> it's worked for the market. it hasn't worked for the economy, it's worked for the market. >> one reason the interest rate is low because the economy is lousy. i want to give the coos and cfos as much credit as they can. if they keep working their magic in the u.s. and abroad, i this i

the stock cycle arrives. >> don't they have to deploy that capital investment to put them back to work to lower the unemployment rate in order to keep the cycle going. >> they will. >> over the long term, revenue has to grow in order -- >> they will grow. i'm not saying that i won't grow. >> that's why it's important. >> earnings, you want to know shareholder value, look at profits. you want to know how business is faring. look at profits. >> short term, not long term. >> by the way, profits are a turning point profits turn up before revenues turn up. profits will turn down before revenues go down. profits are a leading indicator of the stockmarket. anyway, carole roth, good fun, great stuff. now, tomorrow, tomorrow, a big day in dallas. get this. jochlt w. bush presidential library will have its grand opening, what other time to have the debate in the recent rise in the public opinion polls and could he be blamed noer the

crisis? president bush's chief economic adviserant to join us live from dallas. stay with us. bush even with obama in the polls. go figure. i'm kudlow. we'll be right back.

on the presidential comeback, the new george w. bush presidential library opens tomorrow. get this he has 47% approval. that's way up from his 23% low

when he left office. he actually now in a bunch of polls is basically tied with president obama. so that's comeback city. anyway, with all five living u.s. presidents gathering in dallas tomorrow, i have to ask, does america miss george bush yet? joining us from the bush library in dallas, bush's chief economic adviser, our pal jared bernstein is still there. ed, great to see you, welcome back. the obvious question, for two political campaign, basically, president barack obama blamed former president bush for the financial crisis and the recession. do you think that mr. bush deserves blame for the financial crisis? >> well, i don't think he does deserve the blame. i think the events that happened in the period 2005, '6, '7, that led up to the crisis and certainly those in 2007 and '8 were unprecedented. they weren't expected by

markets, they western expected by my colleagues in the community. they western expected by financial analysts. if you look at the policies of the bush administration, you know, things are often blamed, things like deregulation. you know, there is not a whole lot of deregulation you can point to that would have been responsible for this i think most people, most serious academics who look at it, most scholars who look at it now attribute to primarily having to do with the flood in the united states that depressed the credit spreads and as a result resulted in much higher devils. >> those housing regulationles. all right. let me ask another question. many conservatives have criticized former president bush because he spenty too much. they point to the entitlements, no child left behind, which was never fund and, of course, the medicare drug benefit, which actually is coming in cheaper and popular but was never

funded. president obama accepted those entitlements. i want to ask you, did problem spend too much? >> well, here's the evidence. if you look at the ratio of government spending to the size of the economy in the bush term, it was 19.6%, which is below all of the four previous president, certainly below president obama. now, you know, you can always say, well, you know, he could have done better, he didn't need to put in the additional medicare provisions the war, obviously, had some effect on it. but overall, when you look at the total picture, it actually is a picture that looks like a pretty fiscally responsible peerksd especially when we compare it to the period we are in right now. >> let me bring in jared bernstein, you heard ed, a fiscally responsible period, president bush did not cause the financial meltdown. your thoughts. >> i don't think i'm in a place to get particularly negative about president bush before his

library open, i also like those pictures and he is rewriting history in some ways there. i agree with him, by the way, with the spending record, it's on record. i agree many of the deregulation markets took place before george bush got there. what i don't agree with is fiscal reptitude. bush presided over the massive cuts in two wars. we have never done that in history. the budget deficits we are wrestling now were largely borne in the bush years because of what i would call pretty irresponsible fiscal policy. then when you look at the economy, j job growth, income growth, poverty, so on those metrics, george bush did very badly. >> all right, let's get ed. >> i don't think he's responsible for that, though. >> let's get ed's reaction to what chad bernstein is saying. yes. >> well, remember when the president came in, when

president bush came in, he also inherreted a recession, not one he talked about. in terms of laying that on the back of his predecessor. but there was a recession. it took a while to turn things around. that didn't happen until 2003 and, you know, if you look at the deficits again, i mean, i'm surprised that jared says get during that period, that was really a -- i mean, that was a relatively benign period. if you look at 2007, before the crisis, the deficit was 1.2%. that's tiny, that's almost a balanced budget. so you know, if we had been able to keep on that path, everything would have been well. of course, we didn't keep on that path, along came the financial crisis and, you know, as you know, we're here now and, in part, as a result of get but i would not say that the tax policies were irresponsible. in fact, i would argue that those tax policies were pro growth. you are back to 2003. i was going to say, go ahead, larry. sorry. >> i just want to go back to

jared's point. you can buckle in. jared, for irresponsible tax policy, president obama basically embraced 99.99% of it and made it permanent so it's so ironic. >> that's a a good one. >> the great debate in washington for several years was whether to extend the bush tax cuts. okay. >> right. >> this is when mr. bush's polls were very low. reality is we did extend the bush tax cuts. they became a great middle class permanent tax cut. >> so, look, i mean, i think it's 82%. but i no longer call them the bush tax cuts. now they're the obama tax cuts. are you absolutely right. he legislated 82% of those cuts. i think that's fiscally irresponsible, too. look, think, ed is right about the deficit, to gdp ratio. but i also think you have to square those numbers with the worst job growth of any expansion on record, meaning income falling, poverty going up, inequality through the roof.

yet at the same time setting the stage for a very insufficient revenue base. >> all right. >> through the tax cuts. >> we have basically run out of time on this. i'd like to give you more. i want to wish you all the best of luck tomorrow in the opening of the library. i hope the president enjoys it. i know he has been pursuing a great art career as well. i hope everybody has a great time with all the expresidents. i'm larry kudlow. revolutionizing an industry can be a tough act to follow,

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